In 2010, two Harvard economists published an academic paper that spoke to the world’s biggest policy question: should we cut public spending to control the deficit or use the state to rekindle economic growth? Growth in a Time of Debt by Carmen Reinhart and Kenneth Rogoff has served as an important intellectual bulwark in support of austerity policies in the US and Europe. It has been cited by politicians ranging from Paul Ryan, the US congressman, to George Osborne, the UK chancellor. But we have shown that several critical findings advanced in this paper are wrong. So do we need to rethink austerity economics more broadly?

Their research is best known for its result that, across a broad range of countries and periods, economic growth declines dramatically when a country’s level of public debt exceeds 90 per cent of gross domestic product. In their work with a sample of 20 advanced economies in the postwar period, they report that average annual GDP growth ranges between about 3 per cent and 4 per cent when the ratio of public debt to GDP is below 90 per cent. But it collapses to -0.1 per cent when the ratio rises above a 90 per cent threshold.

In a new working paper, co-authored with Thomas Herndon, we found that these results were based on data errors and unsupportable statistical techniques.

[…]

We are not suggesting that governments should borrow and spend profligately. But judicious deficit spending remains the single most effective tool we have to fight against mass unemployment caused by severe recessions. Recent research by Prof Reinhart and Prof Rogoff, along with all related arguments by austerity proponents, does nothing to contradict this fundamental point.

This is big news because this is what many of the so-called VSP’s (very serious people) have been using for years to justify austerity policies. Another way to say this is that Keynes is still right. Here’s Paul Krugman’s take, The Excel Depression.

Ms. Reinhart and Mr. Rogoff had credibility thanks to a widely admired earlier book on the history of financial crises, and their timing was impeccable. The paper came out just after Greece went into crisis and played right into the desire of many officials to “pivot” from stimulus to austerity. As a result, the paper instantly became famous; it was, and is, surely the most influential economic analysis of recent years.

In fact, Reinhart-Rogoff quickly achieved almost sacred status among self-proclaimed guardians of fiscal responsibility; their tipping-point claim was treated not as a disputed hypothesis but as unquestioned fact. For example, a Washington Post editorial earlier this year warned against any relaxation on the deficit front, because we are “dangerously near the 90 percent mark that economists regard as a threat to sustainable economic growth.” Notice the phrasing: “economists,” not “some economists,” let alone “some economists, vigorously disputed by other economists with equally good credentials,” which was the reality.

For the truth is that Reinhart-Rogoff faced substantial criticism from the start, and the controversy grew over time. As soon as the paper was released, many economists pointed out that a negative correlation between debt and economic performance need not mean that high debt causes low growth. It could just as easily be the other way around, with poor economic performance leading to high debt. Indeed, that’s obviously the case for Japan, which went deep into debt only after its growth collapsed in the early 1990s.

Like other things in the recent past – ahem..Irag…ahem – this study fit well in to the VSP’s pre-determined outcome. So it became the de facto study to prove austerity works. Now that it’s been debunked let’s hope austerity policies will die with it.

Because we have a much, much bigger problem then debt and deficits – Jobs. The Jobless Trap.

But while debt fears were and are misguided, there’s a real danger we’ve ignored: the corrosive effect, social and economic, of persistent high unemployment. And even as the case for debt hysteria is collapsing, our worst fears about the damage from long-term unemployment are being confirmed.

[…]

So we are indeed creating a permanent class of jobless Americans.

And let’s be clear: this is a policy decision. The main reason our economic recovery has been so weak is that, spooked by fear-mongering over debt, we’ve been doing exactly what basic macroeconomics says you shouldn’t do — cutting government spending in the face of a depressed economy.

It’s hard to overstate how self-destructive this policy is. Indeed, the shadow of long-term unemployment means that austerity policies are counterproductive even in purely fiscal terms. Workers, after all, are taxpayers too; if our debt obsession exiles millions of Americans from productive employment, it will cut into future revenues and raise future deficits.

Our exaggerated fear of debt is, in short, creating a slow-motion catastrophe. It’s ruining many lives, and at the same time making us poorer and weaker in every way. And the longer we persist in this folly, the greater the damage will be.

Hey, just because virtually everyone who has been arguing the case for deficit reduction for years has been shown to be a crank, a charlatan or shockingly bad at arithmetic is no reason to question your beliefs. Of course austerity is sane! It just must be! Clearly the problem isn’t that austerity is the wrong prescription, it’s that now only bloggers will be making the case and they won’t dominate the debate like the long, long line of discredited analysts and economists who history has proven to be asses. It’s tough times for austerians.

01.30.13

Paul Krugman’s been taking a lot of undeserved s&#t for years now. Mainly because he’s been right about the economy. This has come up again because he was on “Morning Joe” on Monday and they didn’t like what he had to say.

Paul Krugman went on Morning Joe and challenged the Grand Wisdom of the Austerians. Joe Scarborough went and had aconniption fit worthy of a medieval prelate being confronted with heliocentrism for the first time. In Scarborough’s world, to believe that the deficit is anything less than a sword of Damocles is to be insane and unworthy of polite society. And yet, Krugman’s understanding of the economy is widespread, basic Keynesianism that has been proven right time and time again.

How is it that Scarborough lives in such an ideological bubble that standard Keynesianism is so shocking?

[…]

Here at Hullabaloo we call it the Kool Kids Table, a pathway to power and social acceptance inaccessible to those who don’t hold the “right” views.

Do I believe that everyone in Joe Scarborough’s sphere of influence knows that Keynesianism is accurate and that Krugman is right, but chooses to say otherwise because it pads their bank account? Of course not. It takes a conspiracy theorist and an idiot to believe that. Washington is corrupt, but it’s not that corrupt.

No, most of these people believe what they say. I don’t doubt that Scarborough’s perplexed shock is genuine. Just like I believe that most of the conservative theologians who burned Giordano Bruno at the stake believed that our solar system was the only one of its kind. After all, anyone who believed otherwise wasn’t taken seriously and didn’t advance in the Church hierarchy. Everyone who was anyone knew better, and since Bruno refused to accept the conventional wisdom he had to be shunned and ultimately silenced. Bruno’s ideas were unserious and dangerous. The man had his head in the sand and couldn’t see what seemed obvious to everyone else.

Perhaps one day the Church of the Austerians will belatedly apologize to Keynes, Krugman, Stiglitz and all the other great economists whose names have been dragged through the mud. But not likely soon, and not during their lifetimes. In our own sordid lifetimes, Popes Simpson and Bowles will continue to bestow favors upon their cardinals, giving communion only to the Kool Kids who deserve it.

Krugman’s and the Keynesian argument is that most immediate issue we have is to put people back to work, not the deficit. Once the unemployment rate is back down to around 5% then it’s time to start working on the deficit. In other words were in a Depression – not a great one but one nonetheless – and if we don’t put people back to work will stay in it, or as today’s news shows, fall back into recession. (See this from a few years back from Robert Reich, My Father and Alan Greenspan).

The thing is Joe Scarborough and his friends at the Kool Kids Table can scoff at Krugman all they want. But that doesn’t change the fact that he is, and was, right.

Krugman was also on Washington Journal this morning, watch it then you’ll understand what’s going on.

That comes from this PBS News Hour item from 2010 on Americans perception of inequity in the United State, Land of the free, Home of the poor. It’s based on a study which asks Americans to choose between three wealth distribution models and pick which one they prefer. Here are the pie charts and what the study found.

We had 7,000 people distributed around the U.S., different levels of income, education, wealth, political opinions — 92 percent of the Americans picked Sweden over the U.S. When we broke it by Democrats and Republicans, Democrat, it was 93 percent, Republican, it was 90.5 percent.

So there’s a difference, but the difference is tiny. And one of the possibilities is that, when we dig deep down and we ask people to examine their core beliefs about a just society, Americans are really quite consistent in terms of thinking this is way too much inequality, and we want something that is much more equal to Sweden.

Because most Americans don’t realize how unequal our country has become, is why this problem isn’t getting fixed and can’t be fixed. There is no way to fix a problem, if most aren’t even aware there is a problem. And, of course, those at the top don’t see it as a problem.

The reason to point all of this out is that this and the fact that until we become a more equal society, as we once were, prosperity for all will not return to our country. And this not even being addressed in our current campaigns for President and Congress. Which is what this article points out, Prosperity economics: Answering America’s top unasked questions.

Economist Dean Baker was one of the pioneers of blogging in the late 1990s, when his “Beat the Press” blog began as a weekly online column consisting of concise critiques of economic stories in the New York Times and Washington Post. He’s still at it, but with more continuous posting and a wider range of targets – up to and including America’s establishment press corps as a whole. Such was the case with a recent post, “‘Are Americans Better Off Today Than They Were Four Years Ago?’ The Question That Exposes Incompetent Reporters”.

Why is this question a sign of incompetent reporting? Baker deftly explains:

“Suppose your house is on fire and the firefighters race to the scene. They set up their hoses and start spraying water on the blaze as quickly as possible. After the fire is put out, the courageous news reporter on the scene asks the chief firefighter, ‘is the house in better shape than when you got here?’

“Yes, that would be a really ridiculous question… A serious reporter asks the fire chief if he had brought a large enough crew, if they had enough hoses, if the water pressure was sufficient. That might require some minimal knowledge of how to put out fires.

“Similarly, serious reporters would ask whether the stimulus was large enough, was it well-designed, and were there other measures that could have been taken like promoting shorter workweeks, as Germany has done.”

There’s one more point Baker could have made: Even if you want to know what shape the house is in and why, you have to ask these other questions in order to make sense of the situation. Even wrong questions make more sense when you start with the right ones.

Unfortunately, what Baker is pointing out is not merely a matter of individual bad reporting. Rather, it reflects on the American media establishment as a whole – and the incompetence affects virtually every issue in the news, not just economics. I could write an entire column on that topic – from the Iraq War to the housing bubble and the Great Recession that followed, America’s media establishment has been either AWOL or wrong about the biggest political stories of the new millenium. It’s not just that they got the wrong answers. As Baker makes clear, they were asking the wrong questions.

But there’s a more immediate reason to take note of Baker’s point: Because it applies equally well to coverage of the economic choices before America today. The questions Baker raised – was the stimulus large enough, was it well-designed, could other measures have been taken – are backward-looking ones, but it’s not that hard to come up with forward-looking ones, too. Here are two obvious important ones, for example: “How do we get tens of millions unemployed, and underemployed back to work?” and “How do we rebuild the sort of sustained, broad-based prosperity that America and Western Europe enjoyed in the post-World War II era?”

There is no clear correlation between tax cuts for high earners and economic growth, according to a new study by Congress’ nonpartisan policy analyst.

“There is not conclusive evidence, however, to substantiate a clear relationship between the 65-year steady reduction in the top tax rates and economic growth,” concluded a report by the Congressional Research Service released Friday. “Analysis of such data suggests the reduction in the top tax rates have had little association with saving, investment, or productivity growth.”

So, if tax cuts for the wealthy doesn’t spur economic growth then what does? For the answer to that check out this report, Prosperity Economics. Here’s a synopsis:

Dynamic, innovation?led growth, grounded in job creation, public investment and broad opportunity
We must take immediate action to jumpstart our sagging economy. In the future, we need to invest in people and productivity that will lead to good jobs and rising wages. Growth alone is not sufficient to sustain our nation. We need long?term growth that is broadly enjoyed, sustainable in light of our resource and energy constraints and driven by investments in our workforce and strong collective bargaining rules that raise our standard of living.

Security for workers and their families, the environment and government finances
Markets work better when working families feel a basic security for their futures. A dynamic and competitive market requires a strong foundation that is reinforced by programs like Social Security and Medicare that guarantee a secure retirement and access to health care. Markets also work better when governments have the resources to operate smoothly far into the future. These resources are best raised through a progressive tax structure that supports the middle class; no more tax giveaways for corporations and super rich.

Democratic voice, inclusivity and accountability in Washington and the workplace
Money is increasingly corrupting and corroding democracy. When economic winners are allowed to write the economic rules, the rest of America becomes poorer and our political system weaker. For democracy to thrive, strong Unions, and empowered citizens and community organizations are needed to ensure that workers and the broader public have an organized, effective voice in our politics.

Also check out this infographic, which explains Prosperity Economics very well. Fixing this problem can’t be done by the current political structure and leaders. It can only be done by the people. It has to be done by building and movement like the Progressive and Populist movements of last century. Reading this memo would be a good place to start.

Progressives and Democrats cannot possibly match the vast financial resources of business and the wealthy and must turn to building powerful, long-term grass-roots organizations. That makes “Working America” the most important political project in America.

09.06.12

Last night former President Bill Clinton in his speech to the Democratic National Convention, did what he as always done so well. Clinton laid the case out very simply for reelecting President Barack Obama. Using “arithmetic” and simple lines like this to show why Obama must get another term.

In Tampa, the Republican argument against the President’s re-election was pretty simple: we left him a total mess, he hasn’t cleaned it up fast enough, so fire him and put us back in.

That is just so simple and true – the GOP should not be allowed to have the keys back. Of course the true fix for our economy is jobs, but not just any ‘ol jobs, but well paying jobs. But it’s become harder and harder to create those kind of jobs because one party is in an “alternative universe”, as Clinton said last night. Corey Robin explains so well in this post, We’re Going To Tax Their Ass Off!, how the Democrats and the GOP have shifted rolls on deficits over the last 40 years. Here’s an excerpt, on how the GOP changed.

What was the takeaway for Friedman? In Newsweek, he wrote: “I have concluded that the only effective way to restrain government spending is by limiting government’s explicit tax revenue—just as a limited income is the only effective restraint on any individual’s or family’s spending.”

Greenspan made a similar claim before the Senate Finance Committee in 1978: “Let us remember that the basic purpose of any tax cut program in today’s environment is to reduce the momentum of expenditure growth by restraining the amount of revenue available and trust that there is a political limit to deficit spending.”

But it was probably Wanniski, more than anyone, who best understood the political ramifications of a shift away from deficits and balanced budgets. With an almost Schmittian attention to what he called “the political tension in the marketplace of ideas,” Wanniski insisted that conservatives frame the Glaubenskrieg of the two parties as a struggle “between tax reduction and spending increases.” Without that stark choice, he wrote, the Republicans would forever play the part of the disappointed, disapproving, and ultimately powerless parent: “As long as Republicans have insisted upon balanced budgets, their influence as a party has shriveled, and budgets have been unbalanced.”

From that came things like “no tax” pledges, and intransigence. And we know that the new mantra from the GOP, but cynically only when they’re in power is, deficits don’t matter. But while deficits don’t matter to the GOP anymore, neither do good paying jobs that are the foundation of the middle class. And, unfortunately, the Democrats aren’t focusing enough on them either. This recent post from Dan Froomkin lays out the issue pretty well, Obama, Romney and the Low-Wage Future of America.

To the extent that there has been any attention paid to public policy issues amid all the mud-slinging in the 2012 presidential campaign, the most frequent subject has been jobs — and which candidate can create more of them over the next four years.

So far, that debate mostly involves attacking the other guy, rather than advancing any real solution. The Obama campaign has been trying to define Mitt Romney as an effete champion of outsourcing (with some justification) while the Romney camp has dwelled on Barack Obama’s failure to reignite the job market (also with some justification, though in some significant part the failure is because of GOP obstruction).

Their descriptions of their own plans are no more edifying. As the incumbent, Obama has to run on his record — and despite his talk of bold solutions, that means either exaggerating his successes or making a lot of excuses.

Romney, meanwhile, offers little more than a collection of vague allusions to the wholly disproven theory that tax cuts lead to hiring.

The fact is that there is no Democratic jobs plan, if Republicans are able to keep either their control of the House or their ability to paralyze the Senate, or both. And there is no Republican jobs plan at all.

So what’s the press to do? There’s some value in differentiating between the two positions, which in this case has the added advantage of exemplifying each party’s central weakness (in one case a failure of will, in the other a departure from reality).

Froomkin goes on to quote from several recent books on the issues of wages, jobs and poverty. They all come to the same conclusion as to why none of this is likely to change soon.

Neither party, Jeff Faux argues, is addressing the economic realities that make this the most likely future for our country — because changing course would require massive government intervention. There’s a pretty strong consensus among all but the most ideologically conservative economists that the solution would involve considerable public investment in education, infrastructure, and green energy, new policies to promote domestic manufacturing, more activist regulation of the financial industry in particular, and a more progressive tax structure.

But no matter who wins the election, Faux said, the governing elite has pretty much already ruled out that agenda, in favor of light regulation and governmental austerity.

“I think Romney and Ryan are reactionary disasters. But the last four years should have told us something, and that is the power of big money to intimidate the Democrats,” he said. “The deal has already been made … Government over the next 10 to 15 years will be starved for revenue.”

Still, Faux argues, someone should be making the argument to the public that “Hey, this is a big country. It needs a big government to solve its big problems.”

He ended by asking several questions that are not being answered.

With so much at stake, journalists have good reason to go beyond the empty sound bites and, at the very least, ask people who talk about creating jobs: What sorts of jobs?

But beyond that, it’s worth exploring the question of why a much bigger government response to the jobs crisis is so far off the political agenda of the governing class? How did that happen? Who benefits? And who loses? Those are certainly more intriguing things to ponder than whose zinger zinged the most.

Clinton made the case for that last night.

It turns out that advancing equal opportunity and economic empowerment is both morally right and good economics, because discrimination, poverty and ignorance restrict growth, while investments in education, infrastructure and scientific and technological research increase it, creating more good jobs and new wealth for all of us.

Yes the only way out of our current state will be to increase short-term deficits a little more, in order to put Americans back to work, and educate our youth. By ending the Bush Tax Cuts and the two wars he got us into, which are the main sources of our deficit, we can take care of a good chunk of it. The rest will go away once our return on the investments in our country reignite our economy.

Those investments should be along the lines of what this Demos report recommends, Millions to the Middle. In it they lay our 14 policies that should be advanced to firmly re-establish the middle class in America.

Our policy agenda is based on the three broad pillars of middle-class opportunity and security: investments in human capital and education; support for growth, job creation, and career development; and helping Americans build assets.

We have a choice in November as Clinton stated last night.

People ask me all the time how we delivered four surplus budgets. What new ideas did we bring? I always give a one-word answer: arithmetic. If they stay with a 5 trillion dollar tax cut in a debt reduction plan – the – arithmetic tells us that one of three things will happen: 1) they’ll have to eliminate so many deductions like the ones for home mortgages and charitable giving that middle class families will see their tax bill go up two thousand dollars year while people making over 3 million dollars a year get will still get a 250,000 dollar tax cut; or 2) they’ll have to cut so much spending that they’ll obliterate the budget for our national parks, for ensuring clean air, clean water, safe food, safe air travel; or they’ll cut way back on Pell Grants, college loans, early childhood education and other programs that help middle class families and poor children, not to mention cutting investments in roads, bridges, science, technology and medical research; or 3) they’ll do what they’ve been doing for thirty plus years now – cut taxes more than they cut spending, explode the debt, and weaken the economy. Remember, Republican economic policies quadrupled the debt before I took office and doubled it after I left. We simply can’t afford to double-down on trickle-down.

07.06.12

The job numbers are out and they’re not good. We’re in a depression. That’s why Paul Krugman has written a book titled End This Depression Now! The basic premise of the book is that we’re in a depression, not as bad as the Great Depression, we know how to get out of it, and we’re not applying the known fix.

Joshua Holland: Let me ask you first about a somewhat provocative word in your title, the D-word. What makes this a depression rather than a so-called “Great Recession” that we’ve heard so much about?

Paul Krugman: A recession is when things are going down, when the economy is heading down. A depression is when the economy is down, and stays down for a long time. We have the Great Depression, which was more than a decade. There were two recessions in there and there were two periods that were recoveries in the sense that things were getting better, but not much better. The whole period was a period that was really terrible for America and for the world. We’re in a period like that right now. Not as bad as the Great Depression, but that’s not much to recommend it. It’s a sustained thing. We’re now in year five of very high unemployment with terrible prospects for young people. It’s a depression.

And next how to get out of a depression:

JH: I want to encourage people to read the book, but can you just give readers a sense of what you think is the most important thing policy makers should be thinking about doing right now?

PK: The moral of the book is: this doesn’t have to be happening. This is essentially a technical process; it’s a small thing. It’s like having a dead battery in a car, and while there may be a lot wrong with the car, you can get the car going remarkably easily, if you’re willing to accept that’s what the problem really is.

First and foremost, what we have is an economy that just doesn’t have enough spending. Consumers are hobbled by debt, corporations don’t want to spend if they don’t see consumer demand. Somebody has to step in and spend, and that somebody is the government. The government could – and by all means let’s talk about forward-looking, big projects — right away get a big boost in the economy just by reversing the big cutbacks that have taken place in state and local governments these past three years. Get the schoolteachers rehired and get the policemen and firefighters back on the beat. Fill those potholes that have been developing in New Jersey and I believe all over America. We’d then be most of the way back to a decent economy again.

A simpler way to say it is that when consumers can’t spend money (because they don’t have any), and business won’t (because of low, or no demand), then the government must. And if the government won’t spend money, because of politics, then we will languish in a depression until our government does.

The solution is out there and neither the Democrats or the Republicans appear willing to do what is needed to lower unemployment and fix our economy. Anyone worried about the debt should read this, My Father and Alan Greenspan.

When I was a small boy at the start of the 1950s, my father gave me my first economics lesson. “Bobby,” he said with obvious concern, “you and your children and your children’s children will be repaying the national debt created by Franklin D. Roosevelt.”

I didn’t know what a national debt was, but I remember being scared out of my wits.

Dad was wrong, of course. Even though the national debt then was a much higher percentage of the national economy than it is today, it shrank as the economy boomed. My children have never mentioned FDR’s debt. My granddaughter (almost 2) will never pay a penny of it.

Dad, now 96 and still in good health, recognizes how wrong he was then. He admits FDR’s deficit spending not only won World War II but it also got America out of the Great Depression.

The overriding theme of Krugman’s book is we’re in a depression, we were in one before, we know how to get out of one, and we’re not doing it. We have a demand problem that won’t be fixed until jobs return, and wages begin to rise. In times of trouble the government is supposed to act to help the people, it is not, and until it does the depression will continue. All that’s left is to wonder, what is it going to take for our elected representatives to figure this out?

GOP leaders in Congress who can’t stop talking about family values are proposing an array of deep cuts to food stamps, child tax credits, healthcare for the poor, and even block grants that help states with daycare and adoption assistance. Left untouched are military spending that has ballooned over the last decade and tax breaks for the richest Americans. This isn’t courageous or pragmatic. It’s fiscally irresponsible and morally wrong.

[…]

We should not pit national security against economic security. An effective military and a responsive government that doesn’t turn its back on vulnerable families are both achievable if we move beyond false choices. The working poor struggling in minimum-wage jobs, the elderly, and a squeezed middle class did not cause our deficits. They should not be asked to bear the greatest burden.

As economist Paul Krugman points out in the first chapter of his new book, economics is not just about money. There’s a human side to it as well. Providing those who want to work, and can’t find a job, with a job – the dignity of work – would go a long way to healing our long-term economic problems. How Bad Things Are.

Economists, the old line goes, know the price of everything and the value of nothing. And you know what? There’s a lot of truth to that accusation: since economists mainly study the circulation of money and the production and consumption of stuff, they have an inherent bias toward assuming that money and stuff are what matter. Still, there is a field of economic research that focuses on how self-reported measures of well-being, such as happiness or “life satisfaction,” are related to other aspects of life. Yes, it’s known as “happiness research”–Ben Bernanke even gave a speech about it in 2010, titled “The Economics of Happiness.” And this research tells us something very important about the mess we’re in.

Sure enough, happiness research tells us that money isn’t all that important once you get to the point of being able to afford the necessities of life. The payoff to being richer isn’t literally zero–citizens of rich countries are, on average, somewhat more satisfied with their lives than citizens of less well-off nations. Also, being richer or poorer than the people you compare yourself with is a fairly big deal, which is why extreme inequality can have such a corrosive effect on society. But when all is said and done, money is less important than crude materialists–and many economists–would like to believe.

That’s not to say, however, that economic affairs are unimportant in the true scale of things. For there’s one economics-driven thing that matters enormously to human well-being: having a job. People who want to work but can’t find work suffer greatly, not just from the loss of income but from a diminished sense of self-worth. And that’s a major reason why mass unemployment–which has now been going on in America for four years–is such a tragedy.

How severe is the problem of unemployment? That question calls for a bit of discussion.

Clearly, what we’re interested in is involuntary unemployment. People who aren’t working because they have chosen not to work, or at least not to work in the market economy–retirees who are glad to be retired, or those who have decided to be full-time housewives or househusbands–don’t count. Neither do the disabled, whose inability to work is unfortunate, but not driven by economic issues.

Now, there have always been people claiming that there’s no such thing as involuntary unemployment, that anyone can find a job if he or she is really willing to work and isn’t too finicky about wages or working conditions. There’s Sharron Angle, the Republican candidate for the Senate, who declared in 2010 that the unemployed were “spoiled,” choosing to live off unemployment benefits instead of taking jobs. There are the people at the Chicago Board of Trade who, in October 2011, mocked anti-inequality demonstrators by showering them with copies of McDonald’s job application forms. And there are economists like the University of Chicago’s Casey Mulligan, who has written multiple articles for the New York Times website insisting that the sharp drop in employment after the 2008 financial crisis reflected not a lack of employment opportunities but diminished willingness to work.

The classic answer to such people comes from a passage near the beginning of the novel The Treasure of the Sierra Madre (best known for the 1948 film adaptation starring Humphrey Bogart and Walter Huston): “Anyone who is willing to work and is serious about it will certainly find a job. Only you must not go to the man who tells you this, for he has no job to offer and doesn’t know anyone who knows of a vacancy. This is exactly the reason why he gives you such generous advice, out of brotherly love, and to demonstrate how little he knows the world.”

Quite. Also, about those McDonald’s applications: in April 2011, as it happens, McDonald’s did announce 50,000 new job openings. Roughly a million people applied.

If you have any familiarity with the world, in short, you know that involuntary unemployment is very real. And it’s currently a very big deal.

How bad is the problem of involuntary unemployment, and how much worse has it become?

The U.S. unemployment measure you usually hear quoted in the news is based on a survey in which adults are asked whether they are either working or actively seeking work. Those who are seeking work but don’t have jobs are considered unemployed. In December 2011 that amounted to more than 13 million Americans, up from 6.8 million in 2007.

If you think about it, however, this standard definition of unemployment misses a lot of distress. What about people who want to work, but aren’t actively searching either because there are no jobs to be had, or because they’ve grown discouraged by fruitless searching? What about those who want full-time work, but have only been able to find part-time jobs? Well, the U.S. Bureau of Labor Statistics tries to capture these unfortunates in a broader measure of unemployment, known as U6; it says that by this broader measure there are about 24 million unemployed Americans–about 15 percent of the workforce–roughly double the number before the crisis.

Yet even this measure fails to capture the extent of the pain. In modern America most families contain two working spouses; such families suffer, both financially and psychologically, if either spouse is unemployed. There are workers who used to make ends meet with a second job, now down to an inadequate one, or who counted on overtime pay that no longer arrives. There are independent businesspeople who have seen their income shrivel. There are skilled workers, accustomed to holding down good jobs, who have been forced to accept work that uses none of their skills. And on and on.

There is no official estimate of the number of Americans caught up in this sort of penumbra of formal unemployment. But in a June 2011 poll of likely voters–a group probably in better shape than the population as a whole–the polling group Democracy Corps found that a third of Americans had either themselves suffered from job loss or had a family member lose a job, and that another third knew someone who had lost a job. Moreover, almost 40 percent of families had suffered from reduced hours, wages, or benefits.

The pain, then, is very widespread. But that’s not the whole story: for millions, the damage from the bad economy runs very deep.

Republicans who control the House want to block some $55 billion worth of automatic cuts to the Pentagon budget next year. Instead, they want to cut funding for social programs such as food stamps, Medicaid and Meals on Wheels. It’s a choice that has been framed as guns versus butter, and this time, guns are expected to win.

[…]

Texas Democrat Lloyd Doggett says there would be less money for vaccinations, prenatal care and quality nursing homes for seniors.

“It’s shifting all the cost onto the most vulnerable people that don’t have a strong enough lobbyist to stand up for themselves, and I think it is a terrible wrong,” Doggett says.

Republicans on the Budget Committee approved the cuts to social programs, setting up Thursday’s vote in the full House. Texas Rep. Bill Flores defended the cuts in the name of fiscal responsibility.

“We talk about values. Deficit spending is not a value, ladies and gentlemen. Deficit spending is what’s going to bankrupt the future for the children that you say you care so much about,” Flores says.

But as Maryland Democrat Chris Van Hollen points out, Thursday’s vote isn’t really about the size of the deficit. It’s just about who bears the cost of government spending cuts: the military or the needy.

“The issue is not whether we should implement a plan to reduce the deficit in a steady, credible and predictable way,” Van Hollen says. “We should. The issue is how should we do it?”

Thousands of Texas public schoolchildren are in more crowded classes this year as districts claim financial hardship following state budget cuts.

The number of elementary school classrooms exceeding the state’s class size cap has more than doubled since last year.

“It’s a huge issue,” said Linda Bridges, president of the American Federation of Teachers chapter in Texas. “This is an issue that not only teachers care about, but parents care about.”

School districts are reporting to the Texas Education Agency that they have broken the cap in more than 6,000 classes this fall – up from 2,238 classes last year, according to the TEA and local officials.

State law limits classes in kindergarten through fourth grade to 22 students per teacher. But districts can seek waivers from the TEA if they’ve gone over the cap for certain reasons, including an unanticipated growth in students or a shortage of space.

The TEA nearly always grants the waivers, and this year state Education Commissioner Robert Scott expanded the reasons districts could use to include “financial hardship.”

The new category was the most cited by districts, said TEA spokeswoman Debbie Ratcliffe.[Emphasis added]

Districts faced unprecedented budget cuts this year, with state lawmakers allocating $2 billion less than schools historically would have received.

There’s a growing labor crisis in Texas schools, as districts respond to sweeping reductions in state education aid. From Corpus to Dallas, many districts have chosen to lay off some of their lowest wage earners, such as custodians and cafeteria workers.

In Dripping Springs, teachers now have 15 minutes to clean their own classrooms after school. San Antonio’s custodians don’t arrive until late in the school day, so food service workers there put kitchen duties on hold while mopping up lunchroom spills.

Rachel Martinez, executive vice president of the San Antonio Alliance of Teachers and Support Personnel, says the layoffs are tough on employees, but they also affect pupils.

“Our environments aren’t conducive to learning, you know, free of viruses and communicable diseases. There’s spills and upchucks, and they don’t have the capability to have that cleaned properly and immediately.”

She says she’s also worried about workers being injured trying to perform duties for which they weren’t trained, or simply trying to keep up with an increased workload. San Antonio custodian crews have largely been moved to off-campus pools, with each janitor responsible for cleaning about 30 percent more space than formerly.

As heard at this week’s GOP debate. Let him die! Was what was someone screamed and the crowd cheered. Many are expressing shock that the GOP actually means what they’ve been saying for decades – since the creation of Social Security, Medicare, and Medicaid – that they want to destroy them. As is evident from this video, villager Chris Matthews is having a hard time believing that the Republicans he’s had on his show for years really want to do this.

Chirs’ horror of having to talk to a sane and rational politician aside, what Bernie is saying is all true. And when people tell you who they are believe them. It’s extremely hard to understand why anyone would believe a Repbulican wants to do anything other than destroy Social Security, Medicare, and Medicaid.

AARON MATÉ: Noam, you mentioned entitlements, and obviously this is an issue that’s come up a lot in the deficit debate. Governor Rick Perry, the Republican presidential hopeful, has called it a Ponzi scheme. But even Democrats seem to buy into this narrative that it’s in crisis. Can you address that?

NOAM CHOMSKY: Social Security is not in any crisis. I mean, the trust fund alone will fully pay benefits for, I think, another 30 years or so. And after that, taxes will give almost the same benefits. To worry about a possible problem 30 years from now, which can incidentally be fixed with little—a little bit of tampering here and there, as was done in 1983—to worry about that just makes absolutely no sense, unless you’re trying to destroy the program. It’s a very successful program. A large number people rely on it. It doesn’t pay munificently, but it at least keeps people alive, not just retired people, people with disabilities and others. Very low administrative costs, extremely efficient, and no burden on the deficit, doesn’t add to the deficit. The effort to try to present the Social Security program as if it’s a major problem, that’s just a hidden way of trying to undermine and destroy it.

Now, there has been a lot of opposition to it since—you know, since the 1930s, on the part of sectors of extreme wealth and privilege, especially financial capital. They don’t like it, for several reasons. One is the rich don’t barely—for them, it’s meaningless. Anyone with—you know, who’s had a fairly decent income, it’s a tiny addition to your retirement but doesn’t mean much. Another is, if the financial institutions and the insurance companies can get their hands on this huge financial resource—for example, if it’s privatized in some way or vouchers—I mean, that’s a huge bonanza. They’ll have trillions of dollars to play with, the banks, the investment firms and so on.

But I think, myself, that there’s a more subtle reason why they’re opposed to it, and I think it’s rather similar to the reason for the effort to pretty much dismantle the public education system. Social Security is based on a principle. It’s based on the principle that you care about other people. You care whether the widow across town, a disabled widow, is going to be able to have food to eat. And that’s a notion you have to drive out of people’s heads. The idea of solidarity, sympathy, mutual support, that’s doctrinally dangerous. The preferred doctrines are just care about yourself, don’t care about anyone else. That’s a very good way to trap and control people. And the very idea that we’re in it together, that we care about each other, that we have responsibility for one another, that’s sort of frightening to those who want a society which is dominated by power, authority, wealth, in which people are passive and obedient. And I suspect—I don’t know how to measure it exactly, but I think that that’s a considerable part of the drive on the part of small, privileged sectors to undermine a very efficient, very effective system on which a large part of the population relies, actually relies more than ever, because wealth, personal wealth, was very much tied up in the housing market. That was people’s personal wealth. Well, OK, that, quite predictably, totally collapsed. People aren’t destitute by the standards of, say, slums in India or southern Africa, but very—suffering severely. And they have nothing else to rely on, but what they—the, really, pittance that they’re getting from Social Security. To take that away would be just disastrous.

It would seem pretty obvious that if corporations and the wealthy aren’t paying taxes – actually getting tax subsidies in many cases – have record cash reserves, and still aren’t hiring, then giving them more money is unlikely to change the unemployment situation. Here’s a snippet of a discussion that was had on the Countdown with Keith Olbermann shortly after President Barack Obama’s speech last Thursday. It’w between Keith, Jeff Madrick, and Eliot Spitzer.

MADRICK: We are going to get a dumb deficit. We are going to get a dumb deficit through tax cuts that are not focused on job creation, not focused on public investment and won’t get into the economy quickly enough. We could have a smart deficit. And he avoided that subject, and he tends to avoid trying to educate the people about basic economics. He does not want to go there.

SPITZER: Yeah, he — can I just pick up on — you just said something so important. This president has had the opportunity to explain economics to the public, and instead, by deferring, he has let the Republicans with their simplistic mantras that are gibberish. But their simplistic mantras have taken hold and taken root, and we’re playing defense, not offense. And that has been a critical political mistake.

OLBERMANN: And the simplest explanation of the economy, which was said to me many years ago for trying to dumb it down for somebody who once froze as a senior in high school when the math got too complicated and started to look at the board sideways to see if it made more sense that way is this. There are three units in an economy that can spend money and keep pushing the money through the machine that we are both served by and protected by and trapped by called this economy. The three units are the government can spend, people, the consumers can spend, or the businesses can spend. If the businesses are not spending and the people don’t have the money to spend, by process of elimination, it requires the government to spend. That oversimplification — would that be enough for him to have said, simply that?

MADRICK: That is not oversimplification. That is precisely true. People cannot spend because they are so indebted. Businesses aren’t spending because people aren’t buying products. We hear all this talk that business isn’t spending because of uncertainty about regulations and what the government — The uncertainty is, is the economy coming back? They don’t want to spend and hire until they get a little — a sense of confidence about that. If they don’t spend and the government doesn’t make up that gap, we really go down the chute. And when I hear all the complaints about the Obama stimulus and how it didn’t create jobs, where is the president talking about? The Obama stimulus did create jobs and prevent our unemployment rate from going to 12 percent perhaps. We need more. We need him to be able to talk more. And the flaw in the speech is that. And I think Eliot hit it on the nose. He does not want to tell the American people about this deficit. And I think he has refused to try to become the education president in these terms.

SPITZER: Keith, I wish he had educated the public. You just got it exactly right. “C” plus “I” plus “G” equals GDP. There is a little thing. Exports minus imports. Consumers, investment, government. If one of the three of them is not spending, GDP goes down. Business is not investing. Consumers don’t have any money left because we are in debt, our houses aren’t going up in value, we are not being paid more, there are too many unemployed, and we have too much on our credit cards. Government is the only place that can do it. We have got to do it. Can I do a simple piece of math?

OLBERMANN: Yes.

SPITZER: $100 billion.

OLBERMANN: Right.

SPITZER: We’re spending $400. If he had have taken $100 billion, divide that by 20,000. How much do you want to pay people, 20,000 bucks, give ’em a good job. Not a great job, but give them something. You could create 5 million jobs. If he took $100 billion and said, “We are going to hire 5 million people, Jeff Immelt, you figure out where to send them so they are doing something productive. Don’t put them inside a bureaucracy. Give them to G.E., to General Motors, the best — to Apple, to Microsoft. I don’t care. Get them to work. Don’t do it with this parsimonious, little bit of dribbling it out here and there. Make it real, make it big, and then he would have been like F.D.R.

That discussion right there is the crux of our economic problem right now. The wealthy and corporations have all the money, and the government and it’s people are in debt. The wealthy and the corporations pay little, if anything, in taxes and they won’t hire people because the economic system is currently working fine for them.

The federal tax rate is the lowerst it’s been since the 1950s. Meaning working and middle class Americans are shouldering more of the tax burden then ever, and much of that money is being given back to the rich and corprations in tax cuts, tax subsidies, and low taxes (historically) across-the-board on wealth and income.

We need jobs in this country, that is what will fix our economy, not tax breaks for the rich and tax subsidies for corporations. And if the corporations that are swimming in money won’t hire, then the federal government MUST start taxing them and using that money to hire workers. It’s time for the government to start working for the working and middle class Americans again.

09.06.11

The reason job creation is not where it needs to be is because we’ve started moving to austerity, in our nation and state, which is filtering down to the local levels as well. Austerity is defined as: In economics, austerity is a policy of deficit-cutting, lower spending, and a reduction in the amount of benefits and public services provided. As history shows austerity will only make our economy worse, but we can also look at history for a way out of this mess. The best way to show this is from a post from 2010 by Robert Reich, My Father and Alan Greenspan.

When I was a small boy at the start of the 1950s, my father gave me my first economics lesson. “Bobby,” he said with obvious concern, “you and your children and your children’s children will be repaying the national debt created by Franklin D. Roosevelt.”

I didn’t know what a national debt was, but I remember being scared out of my wits.

Dad was wrong, of course. Even though the national debt then was a much higher percentage of the national economy than it is today, it shrank as the economy boomed. My children have never mentioned FDR’s debt. My granddaughter (almost 2) will never pay a penny of it.

Dad, now 96 and still in good health, recognizes how wrong he was then. He admits FDR’s deficit spending not only won World War II but it also got America out of the Great Depression.

For whatever reason it is very hard for too many politicians and the traditional media to understand, and they’re unable help the rest of the nation and world understand. That’s why Rep. John Carter’s (R- Round Rock) sorry Op-Ed about too much regulation should be laughed at and used for toilet paper. Carter wants us to believe that government regulation is the reason business and corporations aren’t hiring. But he’s wrong.

The reason businesses and corporations aren’t hiring is because of austerity, job and benefit cuts, and increasing income inequality. As a result we have a demand problem. Americans don’t have money to buy things, which means businesses and corporations won’t hire more people to make more stuff. That’s why as federal, state and local government employees get laid off, as well as teachers, firefighters, etc.., the economy will only get worse. A good job taken away, and replaced (maybe) by a job that pays less and has no benefits, leaves that worker and their family with less money to buy stuff. And the downward spiral continues. Instead of what happened to get us out of the Great Depression.